If only handling Iraq were this easy: On December 4, fifteen months ahead of schedule, the Bush Administration dropped the tariffs it imposed on steel imports in March 2002. The official reason was that they were a great success; few people outside the Administration buy that argument. The real reason, almost everyone agrees, was that the World Trade Organization had ruled the tariffs illegal, and the European Union and other countries were about to impose retaliatory tariffs on US exports, which they were authorized to do under WTO rules. The unilateralist regime had met its match, at least on one issue.
The initial justification for the tariffs was as specious as the justification for their removal. Bush & Co. argued that the US steel industry was being victimized by a surge in cheap imports, which were driving prices down so far that domestic mills couldn’t compete. In fact, the decline of the steel industry is a complex, multidecade story and is hardly the product of a single import surge. Though it’s impossible to read their crimped, mean little minds, it’s almost certain the real reason is that Administration strategists had hoped to pick up enough votes in steel-producing states to swing some electoral votes into the Republican column in 2004.
It’s hard to view the tariffs as a success by any measure. Restricting imports did raise the price of domestic steel, but this hurt steel-using industries like autos and appliances. The rate of job loss in steel did slow: In the twenty months before the imposition of the tariffs, employment in what the Bureau of Labor Statistics calls iron and steel mills and ferroalloy production fell by 20.7 percent, compared with a decline of 9.5 percent in the twenty months following. But this improvement was far less impressive than what was seen in the broad economy; employment fell by 1 percent in the first period, and 0.3 percent in the second. So employment shrinkage in steel went from a rate twenty times that in overall employment to one thirty-two times as great–and remained deeply negative. And the move only compounded the hostility foreigners felt at the highhandedness of the Bush Administration.
Of course, failure and foreign hostility haven’t compelled the Administration to reverse its policies on war or global warming. Why the reversal on steel? For one thing, the EU crafted its retaliation very cleverly; it was days away from imposing tariffs on oranges (produced in Florida) and textiles (produced in other crucial Southern states). For another, damage to steel-using industries threatened electoral losses in Michigan, Illinois, Indiana and Wisconsin that could have more than offset gains in steel-producing states like Ohio, Pennsylvania and West Virginia. And for yet another, big business in general abhors protectionism (though industrialists will frequently make exceptions for their own industries). So hostile was the opposition of business free-traders that the Wall Street Journal opened its editorial page, that epicenter of the vast right-wing conspiracy, to a column by a French critic of the Administration, EU trade commissioner Pascal Lamy, who lamented the precedent set by the United States as one that might be adopted by other countries.
There’s a lesson here for progressive critics of the WTO. Whatever its flaws, such as secrecy and the privileging of free trade over all else, there is some value to a rule-based multilateral organization designed to regulate international commerce. In criticizing the WTO’s encroachments on our “sovereignty” (as Dick Gephardt did when he described the President as “back[ing] down to foreign pressure”), do we really want to offer any protective cover for the Bush gang’s worst America-first instincts?
